Special Bulletin: Spread the Word — 20,000 Students Whose Postsecondary Schools Recently Closed May Qualify for Federal Help!

Do you know one or more student who recently attended classes at a branch of Education Corporation of America (ECA), a for-profit chain of 70 postsecondary schools? If so, they may need to that the U.S. Education Department (ED) is looking for them — not to do something to those students; but to do something for them!

On December 5 ECA announced it was closing all of its schools — including those named Brightwood Career Institute, Brightwood College, Echotech Institute, Golf Academy of America, and Virginia College. As a result, ED has now launched an effort to locate about 20,000 ECA students.

Students enrolled at an ECA school on or within 120 days before its closure date may qualify for the government to discharge their federal student loan debts for them. They may also be able to transfer their ECA credits to other postsecondary schools, and for help in obtaining transcripts to document their ECA credits.

ECA school closure dates are available to students through a link on ED’s Closed School webpage. ED’s also published an information sheet for students affected by ECA’s closure. Students may also call ED’s Federal Student Aid Information Center for help at (800) 433-3243 or (800) 730-8913 TTY for the hearing impaired.

Affected students should access the closed school information resources cited above if ECA’s school closures left them stuck with student debt, left them with nowhere to go to continue work toward their certificates or degrees, or both. Doing so will help the United States government help them!

College Affordability Solutions’ next regularly scheduled post will appear here on Wednesday, January 2. Until then, feel free to use our Topical Index to explore more than 100 articles on strategies for making college affordable. Happy Holidays!

During College: Use the Holiday Break to Evaluate and Develop Spending Plans

In November 2017, we recommended spending plans for all undergraduate students. This month’s holiday break is the perfect time for them to take two additional steps. First, evaluate fall spending plans. Second, make new spending plans for the next academic term.

All college students need accurate spending plans to:

  • Set financial goals and stay on track to meet them;
  • Choose more and less important costs and income streams; and
  • Successfully predict income and expense amounts and dates.

Sizing up previous plans and making future spending plans requires four steps.

  1. Review last term’s plan. Use bank, credit card, and other financial records to recall each week’s income and expenses. Compare actual amounts to original estimates. Then consider whether what made the estimates high or low will be repeated during the next term. Also identify new and different income and expenses for that term.
  2. Set financial goals for the next term that correspond to academic and life goals. A student got all Cs in his first term. But he hopes to go to graduate school. So he wants all As and Bs next term. He sets a financial goal of lowering his costs by a certain amount during that term. This will make it possible for him cut his weekly work hours, giving him more time to study.
  3. Estimate weekly income and expenses for the next term. Remember to make adjustments if that term is longer or shorter than the fall term.
  4. Schedule dates for comparing actual and estimated income and expenses during next term. Then make changes as needed.

Student income and expenses usually fall into several general categories:

  • Income — Family contributions, financial aid, reimbursements, savings withdrawals, and take-home pay; and
  • Expenses — Books and class supplies, deposits to emergency savings, personal spending, room and board (or groceries, rent, and utilities if living off-campus) transportation, and tuition and fees.

Married students should count their spouses’ salaries or wages as take-home pay. Child care costs are personal spending. So are medication and treatment costs that doctors classify as medical musts. Insurance reimbursements for such costs are reimbursements.

Don’t neglect emergency savings. A “safety net” is always needed in case there are unexpected costs.

This year’s college students average about $17,000 in spending not including tuition and fees. Unfortunately, many try to “wing it” when it comes to their spending. So it’s no surprise that the top two reasons for dropping out are financial.

This makes it absolutely necessary to review the last term’s spending plan. And it’s equally important to use results from that review when making the next term’s spending plan!

We’re planning to take a break from publishing articles over the next three weeks. But we’ll begin posting them again on this website every Wednesday beginning January 2, 2019. Meanwhile, you’re welcome to use our Topical Index to find more than 100 articles on strategies for keeping postsecondary educational costs within your means.

Happy Holidays from College Affordability Solutions!

Before College: Roth IRAs — A College Savings Option

Your newborn baby or young child may or may not go to college. If they do, you want to help him avoid massive student loan debt. But you’re line of work generates middle-class incomes. So where can you save the money you’ll need to achieve this worthy goal?

How about a Roth IRA?

What Are IRAs?

A Roth IRA is an individual retirement account.

The maximum that may be deposited into a Roth IRA is $5,550 per year, or $6,500 per year once you’re 50. This shrinks for high-income individuals and couples.

You pay no federal income taxes the earnings that grow your Roth IRA’s balance, but whatever you withdraw from that balance is taxable. Generally, there’s also a 10% penalty on withdrawals you make before you turn 59.5.

Using IRAs for College

Regardless of your age, there’s an exception under which you pay no penalty on withdrawals that don’t exceed qualified education expenses for the Roth IRA’s beneficiary at an eligible postsecondary institution.

To calculate qualified education expenses:

1. Add charges for tuition, fees, books, supplies, equipment, and special needs services the beneficiary must pay to attend the school;

2. If the beneficiary is enrolled at least half-time, add room and board, too, up to the lesser of (a) the school’s published room and board amount, or (b) the beneficiary’s actual charges for living and eating in school-owned and operated housing; and

3. Subtract the beneficiary’s tax-free education assistance — i.e. the untaxed portions of grants and scholarships; distributions from Coverdell education savings accounts; and educational assistance from employers, the Veterans Administration, and other sources.

An eligible postsecondary institution is a college, university, or vocational school eligible to participate in the federal student aid programs.

The beneficiary may be you, your spouse, or your child and grandchild, or your spouse’s child and grandchild.

Pros and Cons

Roth IRA advantages for college savings include:

Flexibility to use them for either college or retirement;

Tax-free growth;

Contributions alone can add up to at least $99,000 if you maximize them for 18 years;

Their balances don’t count toward Expected Family Contribution (EFC) when the beneficiary applies for financial aid, whereas 5.64% of other assets do.

Disadvantages include:

Amounts spent on college are lost for retirement;

Contribution limits are lower than for many other college savings instruments;

Withdrawals are taxed, whereas 529 plan withdrawals aren’t;

Untaxed portions of one year’s withdrawals count toward the beneficiary’s financial aid EFC in two more years.

Roth IRAs are good retirement saving options. They’re also good college saving options if you’re middle-class and not yet sure whether the beneficiaries will pursue postsecondary learning.

Contact College Affordability Solutions for free consultations if you’re looking for options to keep postsecondary educational costs within your means.